9

Identifying Market
Segments and Targets

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Learning Objectives
After reading this chapter, you should be able to:

1.Explain what market segmentation is and when to use it.

2.Identify the five steps involved in segmenting and targeting
markets.
3.Recognize the different factors used to segment consumer and
organizational markets.
4.Know how to develop a market-product grid to identify a target
market and recommend resulting actions.
5.Explain how marketing managers position products in the
marketplace.
6.Describe three approaches to developing a sales forecast for a
company.

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Market Segmentation

Market
Segments

The relatively homogeneous

groups of prospective buyers that
result from the market
segmentation process.

The process of dividing a market

Market
into meaningful, relatively similar,
Segmentation identifiable segments or groups.

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Market Segments

The groups that result from

the process of market

segmentation; these groups
ideally (1) have common needs
and (2) will respond similarly
to a marketing action.

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

WHY SEGMENT MARKETS?

What Market Segmentation Means

Market segments
Product differentiation
Segmentation: Linking Needs to Actions

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Product Differentiation
A strategy with two different but related

meanings. Its broadest meaning involves a firms

using different marketing mix activities to help
consumers perceive the product as being
different and better than competing products.
Its narrower meaning involves a firms selling two
or more products with different features
targeted to different market segments.

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

FIGURE 9-1 Market segmentation links market need to an

organizations marketing program

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Why segment a market?

Markets have different product needs
and preferences.

Marketers can better identify define

customer needs and wants.

Decision makers can define marketing

objectives and allocate resources
more accurately.
2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Market-Product Grid

Framework to relate the

segment of a market to
products offered or
potential marketing
actions by the firm.
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FIGURE 9-2 Market-product grid showing how different

Reebok shoes reach segments of customers with different
needs

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Effective Use of Market

Segmentation

Mass Customization

One Product
Multiple Market
Segments

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Multiple
Products
Multiple
Market

WHY SEGMENT MARKETS?

When to Segment Markets

One Product and Multiple Market Segments
Multiple Products and Multiple Market Segments
Segments of One: Mass Customization
Synergy The customer value achieved through performing
organizational functions more efficiently.

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

STEPS IN SEGMENTING
AND TARGETING MARKETS
FIGURE 9-3 The five key steps in segmenting and
targeting markets link market needs of customers to the
organizations marketing program.

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

STEPS IN SEGMENTING
AND TARGETING MARKETS
Step 1: Group Potential Buyers into Segments
Criteria to Use in Forming the Segments
Potential for increased profit and ROI
Similarity of needs of potential buyers within a segment
Difference of needs of buyers among segments
Feasibility of a marketing action to reach a segment
Simplicity and cost of assigning potential buyers to segments

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Ways to Segment a Market

Geography
Geography
Demographics
Demographics
Psychographics
Psychographics
Benefits
Benefits sought
sought
Usage
Usage rate
rate

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

FIGURE 9-4
Segmentation
variables and
breakdowns for
Canadian
consumer
markets

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Geographic Segmentation
West49 Skateboards
Region
Global
Market Size
Market Density
Climate
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Bases for Demographic

Segmentation
Xbox 360

Age
Gender
Income
Ethnic background
Family Life Cycle

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Bases for
Psychographic
Segmentation
Personalit
y
Motives
Psychographic
segmentation
Lifestyles

Demographics/
Geodemographi
cs
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Lifestyle Segmentation
How time is spent
Importance of things

around them
Beliefs
Socioeconomic
characteristics
40% of all performance
athletic shoes sold are for
runners.

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Geodemographic Segmentation
Segmenting potential customers into
neighborhood lifestyle categories.
Combines geographic, demographic,
and lifestyle segmentation.
Chinatown in Toronto

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Psychographic
Segmentation
Personality, Motives, Lifestyle

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Benefit Segmentation
Low Carb Food
The process of grouping
customers into market
segments according to
the benefits they seek
from the product.

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Usage-Rate Segmentation
Dividing a market by the
amount of product
bought or consumed.

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

STEPS IN SEGMENTING
AND TARGETING MARKETS
Ways to Segment Consumer Markets (cont.)
Behavioural Segmentation

Usage rate
80/20 rule

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The 80/20 Principle

A principle holding that
20 percent of all customers
generate 80 percent
of the demand.

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

STEPS IN SEGMENTING
AND TARGETING MARKETS
Ways to Segment Organizational Markets
Geographical segmentation
Demographic segmentation
Behavioural segmentation

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

FIGURE 9-5 Dimensions used to segment Canadian

organizational markets

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Xerox Ad
Which variables
should be used to
segment the
organizational
market?

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

STEPS IN SEGMENTING
AND TARGETING MARKETS
Step 2: Group Products to Be Sold into Groups
Step 3: Develop a Market-Product Grid and Estimate
Size of Markets

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

STEPS IN SEGMENTING
AND TARGETING MARKETS
Step 4: Select Target Markets

Criteria to Use in Picking the Target Segments

Market size
Expected growth
Competitive position
Cost of reaching the segment
Compatibility with objectives and resources
Choose the Segments

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

STEPS IN SEGMENTING
AND TARGETING MARKETS
Step 5: Take Marketing Actions to Reach Target Markets
Your Wendys Segmentation Strategy

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

How can Wendys target

different market
segments with different
advertising programs?

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

STEPS IN SEGMENTING
AND TARGETING MARKETS
Step 5: Take Marketing Actions to Reach Target Markets
(cont.)

Apples Ever-Changing Segmentation Strategy

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

POSITIONING THE PRODUCT

Two Approaches to Product Positioning

Product Positioning Using Perceptual Maps
Positioning Milk Drinks for Children
Repositioning Chocolate Milk for Adults

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Positioning
The place a product, brand, or
group of products occupies in
consumers minds relative to
competing offerings.

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Repositioning
Changing consumers perceptions
of a brand in relation to
competing brands.

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Repositioning
Why
Why reposition
reposition
established
established
brands?
brands?
Changes
Changes in
in
Social
Social
Environment
Environment

Changing
Changing
Demographics
Demographics
Declining
Declining
Sales
Sales

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Perceptual Mapping
A means of displaying or
graphing, in two or more
dimensions, the location of
products, brands, or groups of
products in customers
minds.

2006 McGraw-Hill Ryerson Ltd. All rights reserved.

Perceptual Map and

Positioning Strategy for Levi
Strauss Products

2006 McGraw-Hill Ryerson Ltd. All rights reserved.